##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ________ to _________
 Commission File Number: 000-53198
 Merchants & Marine Bancorp, Inc.
  Mississippi
    
    26-2498567(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)3118 Pascagoula Street, Pascagoula, Mississippi
    
    39567(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o (Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o
Yes þ No




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TABLE OF CONTENTS
 Part 1: Financial InformationItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    9Item 4T. Controls and Procedures
    
    
    31Part II. Other InformationItem 1. Legal Proceedings
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. (Removed and Reserved)
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    32SIGNATURES
    
    
    33Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I  FINANCIAL INFORMATION
 
 Item 1:
    
    Financial Statements
 MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 (Unaudited)
    
    
    (Audited)March 31, 2010
    
    
    December 31, 2009ASSETS:Cash and due from banks (non-interest bearing)
    
    $
    91,923,271
    
    
    
    14,451,113Federal funds sold
    
    
    2,550,000
    
    
    
    16,450,000Securities:Available for sale, at market value
    
    
    27,421,471
    
    
    
    33,325,635Held to maturity, at amortized cost
    
    
    158,474,843
    
    
    
    143,957,199Non-marketable equity securities
    
    
    900,060
    
    
    
    900,060Loans, less allowance for loan losses of $3,100,000
and $3,100,000, respectively
    
    
    213,307,732
    
    
    
    207,113,223Property and equipment, net
    
    
    16,461,544
    
    
    
    16,778,718Other real estate owned
    
    
    2,147,111
    
    
    
    2,194,611Accrued income
    
    
    2,371,350
    
    
    
    2,499,639Other assets
    
    
    12,934,083
    
    
    
    12,803,687TOTAL ASSETS
    
    $
    528,491,465
    
    
    
    450,473,885LIABILITIES AND STOCKHOLDERS EQUITY:Deposits:Non-interest bearing demand
    
    $
    74,513,030
    
    
    
    77,614,260Interest bearing demand, savings, money market, and
other time
    
    
    383,765,183
    
    
    
    305,253,753Total deposits
    
    
    458,278,213
    
    
    
    382,868,013Federal funds purchased and securities sold under
agreements to repurchase
    
    
    10,461,403
    
    
    
    8,433,632Accrued expenses and other liabilities
    
    
    8,368,750
    
    
    
    8,187,322Total liabilities
    
    
    477,108,366
    
    
    
    399,488,967Stockholders Equity:Common stock  $2.50 par value; 5,000,000 shares authorized;
1,330,338 shares issued and outstanding
    
    
    3,325,845
    
    
    
    3,325,845Surplus
    
    
    14,500,000
    
    
    
    14,500,000Retained earnings
    
    
    36,016,904
    
    
    
    35,560,524Accumulated other comprehensive income:Unrealized gain on securities available for sale
    
    
    157,084
    
    
    
    215,284Unrealized gain (loss) on defined benefit pension plan
    
    
    (2,616,734
    )
    
    
    (2,616,735
    )Total stockholders equity
    
    
    51,383,099
    
    
    
    50,984,918TOTAL LIABILITES AND STOCKHOLDERS EQUITY
    
    $
    528,491,465
    
    
    
    450,473,885
   3




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MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 Three Months EndedMarch 31,2010
    
    
    2009Interest Income:Interest and fees on loans
    
    $
    3,483,863
    
    
    
    3,469,300Interest on investment securities:Taxable
    
    
    1,229,332
    
    
    
    1,643,910Exempt from federal income tax
    
    
    162,274
    
    
    
    81,656Interest on federal funds sold
    
    
    18,338
    
    
    
    17,574Total interest income
    
    
    4,893,807
    
    
    
    5,212,440Interest Expense:Interest on deposits
    
    
    994,429
    
    
    
    1,342,791Interest on federal funds purchased
and securities sold under agreements
to repurchase
    
    
    7,151
    
    
    
    9,645Total interest expense
    
    
    1,001,580
    
    
    
    1,352,436Net interest income
    
    
    3,892,227
    
    
    
    3,860,004Provision for loan losses
    
    
    131,864
    
    
    
    74,390Net interest income
after provision for loan
losses
    
    
    3,760,363
    
    
    
    3,785,614Non-Interest Income:Service charges
    
    
    1,003,492
    
    
    
    945,244Miscellaneous
    
    
    543,089
    
    
    
    474,301Total non-interest income
    
    
    1,546,581
    
    
    
    1,419,545Non-Interest Expense:Salaries and employee benefits
    
    
    2,120,075
    
    
    
    2,052,143Premises
    
    
    784,494
    
    
    
    762,040Miscellaneous
    
    
    1,388,788
    
    
    
    1,286,749Total non-interest expense
    
    
    4,293,357
    
    
    
    4,100,932Income before income taxes
    
    
    1,013,587
    
    
    
    1,104,227Provision for income taxes
    
    
    245,770
    
    
    
    335,737NET INCOME
    
    $
    767,817
    
    
    
    768,490NET INCOME PER COMMON SHARE
    
    $
    0.58
    
    
    
    0.58
   4




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MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    767,817
    
    
    
    768,490Other comprehensive income, net of tax:Unrealized holding losses
arising during period
    
    
    (58,200
    )
    
    
    (211,308
    )Comprehensive income
    
    $
    709,617
    
    
    
    557,182
   5




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MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 Three Months EndedMarch 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    767,817
    
    
    
    768,490Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    359,870
    
    
    
    354,877Provision for loan losses
    
    
    131,864
    
    
    
    74,390Net premium amortization (discount accretion)
    
    
    9,719
    
    
    
    (34,590
    )Decrease in accrued income receivable
    
    
    128,289
    
    
    
    371,363(Decrease) in interest payable
    
    
    (66,381
    )
    
    
    (132,824
    )Net change in other assets and liabilities
    
    
    235,058
    
    
    
    343,998Net cash provided by operating activities
    
    
    1,566,236
    
    
    
    1,745,704CASH FLOWS FROM INVESTING ACTIVITIES:Net (increase) decrease in federal funds sold
    
    
    13,900,000
    
    
    
    (43,286,000
    )Purchase of securities available for sale
    
    
    (10,185,000
    )
    
    
    (40,255,375
    )Proceeds from maturities of securities available for sale
    
    
    16,000,000
    
    
    
    13,875,000Purchase of securities held to maturity
    
    
    (40,109,393
    )
    
    
    (9,696,028
    )Proceeds from maturities of securities held to maturity
    
    
    25,583,333
    
    
    
    64,612,593Net (increase) decrease in loans
    
    
    (6,279,193
    )
    
    
    (3,895,295
    )Purchase of property and equipment
    
    
    (42,696
    )
    
    
    (244,594
    )Net cash (used) by investing activities
    
    
    (1,132,949
    )
    
    
    (18,889,699
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    75,410,201
    
    
    
    12,680,229Net increase in federal funds purchased and
securities sold under agreements to repurchase
    
    
    2,027,771
    
    
    
    4,747,728Dividends paid to stockholders
    
    
    (399,101
    )
    
    
    (731,686
    )Net cash provided by financing activities
    
    
    77,038,871
    
    
    
    16,696,271Net increase (decrease) in cash and due from banks
    
    
    77,472,158
    
    
    
    (447,724
    )Cash and due from banks, beginning
    
    
    14,451,113
    
    
    
    18,065,881Cash and due from banks, ending
    
    $
    91,923,271
    
    
    
    17,618,157
   6




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MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Interim Financial Statements.
  December 31, 2009 Balance Sheet Presentation.
  Use of Estimates.
  2. FAIR VALUES OF FINANCIAL INSTRUMENTS
  Cash and Federal Funds Sold:
  Investment Securities:
  Loans:
  Deposits:
   7




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MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2. FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and federal funds sold
    
    $
    94,473
    
    
    
    94,473
    
    
    $
    30,901
    
    
    
    30,901Securities:Available-for-sale
    
    
    27,421
    
    
    
    27,421
    
    
    
    33,326
    
    
    
    33,326Held-to-maturity
    
    
    158,475
    
    
    
    159,131
    
    
    
    143,957
    
    
    
    145,326Non-marketable
    
    
    900
    
    
    
    900
    
    
    
    900
    
    
    
    900Loans, net of allowance
    
    
    213,308
    
    
    
    212,232
    
    
    
    207,113
    
    
    
    206,563Financial liabilitiesDeposits
    
    
    458,278
    
    
    
    459,052
    
    
    
    382,868
    
    
    
    382,586Federal funds purchased and securities sold
under agreements to repurchase
    
    
    10,461
    
    
    
    10,461
    
    
    
    8,434
    
    
    
    8,434
 3. SUBSEQUENT EVENTS
   8




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
  Formation of Holding Company
   9




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Executive Summary
 U.S. Banker th
    Earnings Highlights
  Earning Assets
   10




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Net Interest Income
      11




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Interest Rate Sensitivity
    Loans
     12




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Allowance for Loan Losses
    Critical Accounting Policies
     13




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Asset Quality
  -
  14




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Securities Available for Sale and Investment Securities
     Deposits
   15




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Liquidity
   Off Balance Sheet Arrangements
  Contractual Obligations
     16




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Risk-Based Capital/Stockholders Equity
    Non-Interest Income
    17




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Non-Interest Expense
   Income Taxes
   18




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TABLE 1
COMPARATIVE AVERAGE BALANCES  YIELDS AND RATES
  2010
    
    
    2009
    
    
    2008Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateAssetsInterest-earning assets:Loans, net of unearned
income
    
    $
    212,286
    
    
    $
    3,484
    
    
    
    6.56
    %
    
    $
    203,173
    
    
    $
    3,469
    
    
    
    6.83
    %
    
    $
    203,418
    
    
    $
    3,892
    
    
    
    7.65
    %Securities held to maturity:Taxable
    
    
    125,344
    
    
    
    1,061
    
    
    
    3.39
    %
    
    
    103,744
    
    
    
    1,252
    
    
    
    4.83
    %
    
    
    138,448
    
    
    
    1,749
    
    
    
    5.05
    %Exempt from Federal
income tax
    
    
    19,267
    
    
    
    150
    
    
    
    3.11
    %
    
    
    9,465
    
    
    
    82
    
    
    
    3.47
    %
    
    
    9,049
    
    
    
    79
    
    
    
    3.49
    %Securities available
for sale:Taxable
    
    
    28,900
    
    
    
    181
    
    
    
    2.51
    %
    
    
    46,886
    
    
    
    391
    
    
    
    3.34
    %
    
    
    18,158
    
    
    
    211
    
    
    
    4.65
    %Federal funds sold
and securities purchased under agreements to resell
    
    
    7,316
    
    
    
    2
    
    
    
    0.11
    %
    
    
    35,237
    
    
    
    18
    
    
    
    0.20
    %
    
    
    42,817
    
    
    
    326
    
    
    
    3.05
    %Total interest-earning
assets
    
    $
    393,113
    
    
    $
    4,878
    
    
    
    4.96
    %
    
    $
    398,505
    
    
    $
    5,212
    
    
    
    5.23
    %
    
    $
    411,890
    
    
    $
    6,257
    
    
    
    6.08
    %Non interest-earning assets:Cash and due from
banks
    
    
    51,580
    
    
    
    
    
    
    
    
    
    
    
    18,069
    
    
    
    
    
    
    
    
    
    
    
    27,664Bank premises and
equipment
    
    
    16,659
    
    
    
    
    
    
    
    
    
    
    
    17,765
    
    
    
    
    
    
    
    
    
    
    
    14,954Other assets
    
    
    15,198
    
    
    
    
    
    
    
    
    
    
    
    13,742
    
    
    
    
    
    
    
    
    
    
    
    14,061Allowance for possible
loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,093
    )
    
    
    
    
    
    
    
    
    
    
    (3,101
    )Total assets
    
    $
    476,550
    
    
    
    
    
    
    
    
    
    
    $
    444,988
    
    
    
    
    
    
    
    
    
    
    $
    465,468
  19




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TABLE 2
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS
  Quarter ended March 31,2010 Compared to 2009
    
    
    2009 Compared to 2008Increase (Decrease) Due To
    
    
    Increase (Decrease) Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest income on:Loans
    
    $
    9,113
    
    
    
    (27
    )
    
    $
    9,086
    
    
    $
    (245
    )
    
    $
    (423
    )
    
    $
    (668
    )Investment securities:Taxable
    
    
    21,600
    
    
    
    (144
    )
    
    
    21,456
    
    
    
    (34,704
    )
    
    
    (497
    )
    
    
    (35,201
    )Exempt from Federal
income tax
    
    
    9,802
    
    
    
    (36
    )
    
    
    9,766
    
    
    
    416
    
    
    
    3
    
    
    
    419Securities available for sale:Taxable
    
    
    (17,986
    )
    
    
    (83
    )
    
    
    (18,069
    )
    
    
    28,728
    
    
    
    180
    
    
    
    28,908Federal funds sold and
securities purchased
under agreements to
resell
    
    
    (27,921
    )
    
    
    (9
    )
    
    
    (27,930
    )
    
    
    (7,580
    )
    
    
    (308
    )
    
    
    (7,888
    )Total
    
    $
    (5,392
    )
    
    $
    (299
    )
    
    $
    (5,691
    )
    
    $
    (13,385
    )
    
    $
    (1,045
    )
    
    $
    (14,430
    )Interest expense on:DDA & Savings
    
    $
    74,112
    
    
    $
    (30
    )
    
    $
    74,082
    
    
    $
    (23,804
    )
    
    $
    (396
    )
    
    $
    (24,200
    )Time deposits
    
    
    (4,487
    )
    
    
    (117
    )
    
    
    (4,604
    )
    
    
    11,943
    
    
    
    (184
    )
    
    
    11,759Federal funds purchased,
and securities sold
under agreements to
repurchase
    
    
    (2,454
    )
    
    
    (4
    )
    
    
    (2,458
    )
    
    
    (6,282
    )
    
    
    (130
    )
    
    
    (6,412
    )Total
    
    $
    67,171
    
    
    $
    (151
    )
    
    $
    67,020
    
    
    $
    (18,143
    )
    
    $
    (710
    )
    
    $
    (18,853
    )Changes in net interest
income-tax equivalent
    
    $
    (72,563
    )
    
    $
    (148
    )
    
    $
    (72,711
    )
    
    $
    4,758
    
    
    $
    (335
    )
    
    $
    4,423
   20




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TABLE 3
SECURITIES AVAILABLE FOR SALE AND PORTFOLIO SECURITIES
  March 31,2010
    
    
    2009
    
    
    2008Securities available for saleU. S. Treasury and other U. S. Government agencies
    
    $
    27,268
    
    
    $
    56,245
    
    
    $
    8,992Obligations of states and political subdivisions
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    Other securities
    
    
    153
    
    
    
    72
    
    
    
    72Total securities available for sale
    
    $
    27,421
    
    
    $
    56,317
    
    
    $
    9,064Investment securitiesU. S. Treasury and other U. S. Government agencies
    
    $
    136,205
    
    
    $
    82,009
    
    
    $
    149,590Obligations of states and political subdivisions
    
    
    22,270
    
    
    
    9,602
    
    
    
    8,700Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    Other securities
    
    
    900
    
    
    
    600
    
    
    
    600Total investment securities
    
    
    159,375
    
    
    
    92,211
    
    
    
    158,890Total securities available for sale and investment securities
    
    $
    186,796
    
    
    $
    148,528
    
    
    $
    167,954
  21




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TABLE 4
MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
  MaturingAfter
    
    
    After 5 YrsWithin
    
    
    1 Yr But
    
    
    But Within
    
    
    After 10 Yrs.1 Year
    
    
    Within 5 Yrs
    
    
    10 Yrs
    
    
    
    
    
    
    
    
    
    
    CarryingAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    AmountSecurities
available for saleU.S. Treasury
and other U.S. Government
agencies
    
    $
    7,045
    
    
    
    1.27
    %
    
    $
    12,593
    
    
    
    2.19
    %
    
    $
    7,630
    
    
    
    3.43
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    27,268Other securities
    
    
    153
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    153Total securities
available
for sale
    
    $
    7,198
    
    
    
    1.27
    %
    
    $
    12,593
    
    
    
    2.19
    %
    
    $
    7,630
    
    
    
    3.43
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    27,421Investment securitiesU.S. Treasury
and other U.S. Government
agencies
    
    $
    4,992
    
    
    
    5.02
    %
    
    $
    85,111
    
    
    
    3.13
    %
    
    $
    38,387
    
    
    
    3.43
    %
    
    $
    7,715
    
    
    
    3.06
    %
    
    $
    136,205Obligations of states
and political
subdivisions
    
    
    673
    
    
    
    4.97
    %
    
    
    11,443
    
    
    
    4.18
    %
    
    
    7,879
    
    
    
    4.36
    %
    
    
    2,275
    
    
    
    6.21
    %
    
    
    22,270Other securities
    
    
    900
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    900Total investment
securities
    
    $
    6,565
    
    
    
    4.98
    %
    
    $
    96,554
    
    
    
    3.25
    %
    
    $
    46,266
    
    
    
    3.56
    %
    
    $
    9,990
    
    
    
    4.88
    %
    
    $
    159,375Total securities
available for sale
and investment
securities
    
    $
    13,763
    
    
    
    3.11
    %
    
    $
    109,147
    
    
    
    3.10
    %
    
    $
    53,896
    
    
    
    3.45
    %
    
    $
    9,990
    
    
    
    4.88
    %
    
    $
    186,796
   22




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TABLE 5
SECURITIES ANALYSIS
 SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYMARCH 31, 2010
    
    
    MARCH 31, 2010GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDCOST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY SECURITIES
    
    $
    27,111,485
    
    
    $
    193,872
    
    
    $
    (37,090
    )
    
    $
    27,268,267
    
    
    $
    136,204,554
    
    
    $
    683,800
    
    
    $
    (510,584
    )
    
    $
    136,377,770STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,270,290
    
    
    
    581,475
    
    
    
    (98,344
    )
    
    
    22,753,421OTHER SECURITIES
    
    
    71,979
    
    
    
    81,224
    
    
    
    
    
    
    
    153,203
    
    
    
    900,000
    
    
    
    
    
    
    
    
    
    
    
    900,000TOTAL
    
    $
    27,183,464
    
    
    $
    275,096
    
    
    $
    (37,090
    )
    
    $
    27,421,470
    
    
    $
    159,374,844
    
    
    $
    1,265,275
    
    
    $
    (608,928
    )
    
    $
    160,031,191
 SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYMARCH 31, 2009
    
    
    MARCH 31, 2009GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDCOST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY SECURITIES
    
    $
    56,238,991
    
    
    $
    199,650
    
    
    $
    (214,728
    )
    
    $
    56,223,913
    
    
    $
    82,008,699
    
    
    $
    1,551,688
    
    
    $
    
    
    
    $
    83,560,387STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,601,849
    
    
    
    275,870
    
    
    
    (19,570
    )
    
    
    9,858,149OTHER SECURITIES
    
    
    71,979
    
    
    
    21,596
    
    
    
    
    
    
    
    93,575
    
    
    
    600,000
    
    
    
    
    
    
    
    
    
    
    
    600,000TOTAL
    
    $
    56,310,970
    
    
    $
    221,246
    
    
    $
    (214,728
    )
    
    $
    56,317,488
    
    
    $
    92,210,548
    
    
    $
    1,827,558
    
    
    $
    (19,570
    )
    
    $
    94,018,536SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYMARCH 31, 2008
    
    
    MARCH 31, 2008GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDCOST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY SECURITIES
    
    $
    8,991,690
    
    
    $
    40,850
    
    
    $
    
    
    
    $
    9,032,540
    
    
    $
    149,591,870
    
    
    $
    2,967,324
    
    
    $
    (12,440
    )
    
    $
    152,546,754STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,699,992
    
    
    
    140,415
    
    
    
    (5,666
    )
    
    
    8,834,741OTHER SECURITIES
    
    
    71,979
    
    
    
    33,377
    
    
    
    
    
    
    
    105,356
    
    
    
    600,000
    
    
    
    
    
    
    
    
    
    
    
    600,000TOTAL
    
    $
    9,063,669
    
    
    $
    74,227
    
    
    $
    
    
    
    $
    9,137,896
    
    
    $
    158,891,862
    
    
    $
    3,107,739
    
    
    $
    (18,106
    )
    
    $
    161,981,495
  23




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TABLE 6
LOAN PORTFOLIO
  2010
    
    
    2009
    
    
    2008Commercial & Industrial
    
    $
    26,386
    
    
    $
    27,648
    
    
    $
    31,804Real Estate
    
    
    149,492
    
    
    
    136,680
    
    
    
    124,679Consumer Loans
    
    
    33,939
    
    
    
    35,527
    
    
    
    40,067Other Loans
    
    
    6,629
    
    
    
    5,486
    
    
    
    6,528Total Loans
    
    $
    216,446
    
    
    $
    205,341
    
    
    $
    203,078
 TABLE 7
LOAN MATURITIES & INTEREST RATE SENSITIVITY
  Remaining Maturity Fixed Rate3 months or less
    
    $
    21,393Over 3 months through 12 months
    
    
    32,768Over 1 year through 5 years
    
    
    154,012Over 5 years
    
    
    5,999Over 1 year but variable rate
    
    
    Total Loans
    
    $
    214,172
  24




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TABLE 8
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
  Quarter ended March 31,2010
    
    
    2009
    
    
    2008Beginning Balance
    
    $
    3,100
    
    
    $
    3,100
    
    
    $
    3,100Charge Offs:Commercial & Industrial
    
    
    43
    
    
    
    9
    
    
    
    13Real Estate
    
    
    30
    
    
    
    16
    
    
    
    2Consumer
    
    
    230
    
    
    
    117
    
    
    
    165Other
    
    
    
    
    
    
    
    
    
    
    Total Charge Offs
    
    
    303
    
    
    
    142
    
    
    
    180Recoveries:Commercial & Industrial
    
    
    17
    
    
    
    5
    
    
    
    13Real Estate
    
    
    17
    
    
    
    
    
    
    
    146Consumer
    
    
    137
    
    
    
    63
    
    
    
    72OtherTotal Recoveries
    
    
    171
    
    
    
    68
    
    
    
    231Net Charge Offs
    
    
    132
    
    
    
    74
    
    
    
    (51
    )Provision for Possible Losses
    
    
    132
    
    
    
    74
    
    
    
    (51
    )Ending Balance
    
    $
    3,100
    
    
    $
    3,100
    
    
    $
    3,100Total Loans Outstanding
    
    $
    216,446
    
    
    $
    205,341
    
    
    $
    203,078Average daily loans
    
    $
    212,286
    
    
    $
    203,173
    
    
    $
    203,418
 Percentages:
    
    2010
    
    
    2009
    
    
    2008Allowance for loan losses to end of quarter total loans
    
    
    1.43
    %
    
    
    1.51
    %
    
    
    1.53
    %Allowance for loan losses to average loans
    
    
    1.46
    %
    
    
    1.53
    %
    
    
    1.52
    %Allowance for loan losses to nonperforming assets
    
    
    70.06
    %
    
    
    146.57
    %
    
    
    368.17
    %Net charge offs to average loans
    
    
    0.062
    %
    
    
    0.036
    %
    
    
    -0.025
    %
  25




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TABLE 9
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
  March 31,2010
    
    
    2009
    
    
    2008% Gross
    
    
    Loan Loss
    
    
    % Gross
    
    
    Loan Loss
    
    
    % Gross
    
    
    Loan LossLoans
    
    
    Allowance
    
    
    Loans
    
    
    Allowance
    
    
    Loans
    
    
    AllowanceOutstanding
    
    
    Allocation
    
    
    Outstanding
    
    
    Allocation
    
    
    Outstanding
    
    
    AllocationCommercial & Industrial
    
    
    7.06
    
    
    $
    219
    
    
    
    7.68
    
    
    $
    238
    
    
    
    15.7
    
    
    $
    485Real Estate
    
    
    61.81
    
    
    
    1,916
    
    
    
    28.9
    
    
    
    896
    
    
    
    61.4
    
    
    
    1,903Consumer
    
    
    22.52
    
    
    
    698
    
    
    
    23.23
    
    
    
    720
    
    
    
    19.7
    
    
    
    612Other
    
    
    8.61
    
    
    
    267
    
    
    
    24.39
    
    
    
    756
    
    
    
    3.2
    
    
    
    100Unallocated
    
    
    
    
    
    
    
    
    
    
    15.81
    
    
    
    490
    
    
    
    
    
    
    
    100
    %
    
    $
    3,100
    
    
    
    100
    %
    
    $
    3,100
    
    
    
    100
    %
    
    $
    3,100
 TABLE 10
NONPERFORMING ASSETS
  2010
    
    
    2009
    
    
    2008Non-accrual Loans & Accruing Loans Past Due 90 Days or more
    
    $
    2,278
    
    
    $
    1,879
    
    
    $
    713Other Real Estate
    
    
    2,147
    
    
    
    236
    
    
    
    129$
    4,425
    
    
    $
    2,115
    
    
    $
    842Nonperforming Assets as % of Total Loans
    
    
    2.04
    %
    
    
    1.03
    %
    
    
    0.41
    %Non-accrual Loans & Loans Past Due 90 Days or More
as % of Total Loans
    
    
    1.05
    %
    
    
    0.92
    %
    
    
    0.35
    %
  26




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TABLE 11
AVERAGE DEPOSITS
  Quarter ended March 31,2010
    
    
    2009
    
    
    2008Non-interest bearing deposits
    
    $
    47,993
    
    
    $
    84,525
    
    
    $
    89,073Interest-bearing deposits
    
    
    251,995
    
    
    
    177,883
    
    
    
    201,687Interest-bearing time deposits
    
    
    107,028
    
    
    
    111,515
    
    
    
    99,572Total
    
    $
    407,016
    
    
    $
    373,923
    
    
    $
    390,332
 TABLE 12
TIME DEPOSITS OF $100,000 OR MORE, MATURITY DISTRIBUTION
  Time remaining until maturity3 months or less
    
    $
    18,575Over 3 through 6 months
    
    
    14,359Over 6 through 12 months
    
    
    18,866Over 12 months
    
    
    6,642Total
    
    $
    58,442
  27




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##### Table of Contents



TABLE 13
SHORT-TERM BORROWINGS
  Daily
    
    
    Average
    
    
    MaximumMarch
    
    
    Average
    
    
    Interest
    
    
    Month-EndBalance
    
    
    Balance
    
    
    Rate*
    
    
    Balance2010Federal funds purchased and
securities sold under
agreements to repurchase
    
    $
    10,641
    
    
    $
    10,745
    
    
    
    0.26
    %
    
    $
    10,6412009Federal funds purchased and
securities sold under
agreements to repurchase
    
    $
    15,665
    
    
    $
    13,199
    
    
    
    0.30
    %
    
    $
    15,6652008Federal funds purchased and
securities sold under
agreements to repurchase
    
    $
    36,225
    
    
    $
    19,481
    
    
    
    2.87
    %
    
    $
    36,225
 *
    
    on daily average balance  28




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##### Table of Contents



TABLE 14
INTEREST SENSITIVITY
  0-3
    
    
    4-12
    
    
    1-5
    
    
    Over 5Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalAssetsInterest-earning assets:Loans, net of unearned income
    
    $
    21,393
    
    
    $
    32,768
    
    
    $
    154,012
    
    
    $
    5,999
    
    
    $
    214,172Investment securities
    
    
    2,995
    
    
    
    3,570
    
    
    
    96,554
    
    
    
    56,256
    
    
    
    159,375Securities available for sale
    
    
    153
    
    
    
    7,045
    
    
    
    12,593
    
    
    
    7,630
    
    
    
    27,421Federal funds sold and securities
purchased under agreements to
resell
    
    
    2,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,550Total interest-earning assets
    
    
    27,091
    
    
    
    43,383
    
    
    
    263,159
    
    
    
    69,885
    
    
    
    403,518Non-interest-earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,173
    
    
    
    125,173Total assets
    
    $
    27,091
    
    
    $
    43,383
    
    
    $
    263,159
    
    
    $
    195,058
    
    
    $
    528,691Liabilities and stockholders equityInterest-bearing liabilities:Int DDAs, MMF, Savings deposits
    
    $
    25,572
    
    
    $
    82,399
    
    
    $
    176,162
    
    
    $
    
    
    
    $
    284,133Time deposits
    
    
    24,689
    
    
    
    58,942
    
    
    
    16,001
    
    
    
    
    
    
    
    99,632Federal funds purchased, and securities
sold under agreements to repurchase
    
    
    10,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,641Total interest-bearing liabilities
    
    
    60,902
    
    
    
    141,341
    
    
    
    192,163
    
    
    
    
    
    
    
    394,406Non-interest-bearing deposits
    
    
    12,729
    
    
    
    37,439
    
    
    
    24,710
    
    
    
    
    
    
    
    74,878Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,477
    
    
    
    8,477Stockholders equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,930
    
    
    
    50,930Total liabilities and
stockholders equity
    
    $
    73,631
    
    
    $
    178,780
    
    
    $
    216,873
    
    
    $
    59,407
    
    
    $
    528,691Interest sensitive gap
    
    $
    (46,540
    )
    
    $
    (135,397
    )
    
    $
    46,286
    
    
    $
    135,651Cumulative interest sensitive gap
    
    $
    (46,540
    )
    
    $
    (181,937
    )
    
    $
    (135,651
    )
    
    $
    (0
    )Cumulative interest sensitive gap
as a percent of total assets
    
    
    -8.80
    %
    
    
    -34.41
    %
    
    
    -25.66
    %
    
    
    0.00
    %
  29




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##### Table of Contents



TABLE 15
CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES, AND OFF-BALANCE SHEET ARRANGEMENTS
  PAYMENTS DUE INONE TOONE YEAR
    
    
    THREE
    
    
    THREE TO
    
    
    OVER FIVEOR LESS
    
    
    YEARS
    
    
    FIVE YEARS
    
    
    YEARS
    
    
    TOTALDeposits without a
stated maturity
    
    $
    165,145
    
    
    $
    100,523
    
    
    $
    93,343
    
    
    $
    
    
    
    $
    359,011Consumer certificates
of deposit
    
    
    83,631
    
    
    
    11,383
    
    
    
    4,618
    
    
    
    
    
    
    
    99,632Federal funds borrowed
& repurchase agreements
    
    
    10,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,641Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 COMMITMENTS
  ONE TOONE YEAR
    
    
    THREE
    
    
    THREE TO
    
    
    OVER FIVEOR LESS
    
    
    YEARS
    
    
    FIVE YEARS
    
    
    YEARS
    
    
    TOTALCommitments to extend
credit:Commercial
    
    $
    5,222
    
    
    $
    349
    
    
    $
    36
    
    
    $
    
    
    
    $
    5,607Residential real estate
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    407Revolving home equity
and credit card lines
    
    
    20
    
    
    
    138
    
    
    
    867
    
    
    
    
    
    
    
    1,025Other
    
    
    5,390
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,390Standby letters of credit
    
    
    258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258
  30




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##### Table of Contents



Item 4T.
    
    Controls and Procedures
 Evaluation of disclosure controls and procedures
 Changes in Internal Controls
  31




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##### Table of Contents



Part II. Other Information
 
 Item 1.
    
    Legal Proceedings
  Item 1A.
    
    Risk Factors
  The recent oil spill in the Gulf of Mexico could negatively affect our local economics and property
values in our markets, which could have an adverse effect on our business or results of operations.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3:
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5:
    
    Other Information
  
 tem 6. Exhibits
 31.1
    
    
    Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C. 350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C. 350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
  32




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##### Table of Contents



SIGNATURES
  MERCHANTS & MARINE BANCORP, INC.Date:  May 17, 2010
    By:
    /s/ Royce CumbestRoyce Cumbest, Chairman of the BoardPresident and Chief Executive OfficerDate:  May 17, 2010
    By:
    /s/ Elise BourgeoisElise Bourgeois, Chief Financial OfficerPrincipal Financial and Accounting Officer  33